There are plenty of adverts on TV and the radio from companies offering you peace of mind by rolling all your debts in to one easy to manage loan but how do you know you can trust them or that it is the right option for you? The thought of getting immediate money to pay off your high interest debts might sound tempting but before you run off and secure your house against the loan, consider these factors to help you choose a debt consolidation company.

Do You Qualify For a Consolidation Loan?

Most debt consolidation companies won’t even consider your application if you are not a homeowner so save time and disappointment by considering if you are likely to be approved or not. A loan already secured on your home is likely to affect your chances of getting the loan as is a poor credit history. If the company does approve your application you are likely to get interest rates not much better than what you are paying on your credit cards.

What Are The Interest Rates

Let’s get one thing straight right now: the attractive rate the company advertises is not the rate you will pay unless you are part of the 1% that qualifies for that rate. It pays to shop around and no matter how understanding or helpful the company appears to be when they are trying to give you a loan make sure you know what the market rates are for someone in your position. This means going to various websites or calling up companies and getting a no obligation quote.

Is It Really A Consolidation Loan?

Read the terms carefully because some debt consolidation companies will contact your creditors on your behalf and arrange to repay your debt at a reduced rate or even negotiate a discount on your debt and charge you the difference. You might think you’ve paid off your credit debt with the loan but actually the loan company is making the repayments on your behalf at a reduced rate and pocketing the difference.

What is the Repayment Period

Most consolidated loans last for 5 years or more during which time you end up paying more in interest than you would on your existing debts. You also need to find out the terms of early repayment as one never knows when you might come in to some money to pay off your debt.

Is the Company Legitimate?

This might sound like a strange question but the debt consolidation has given rise to a large number of boiler room operations who will attempt to extort more money out of you than you bargained for. Before signing any documents make sure you do a check on the Internet for the business name and find out how long they have been in business. Another place to check would be your local Better Business Bureau.